Every startup, sooner or later, will eventually reach the phase in which they need a competent leadership position to lead the business.
With the state of today’s technology-driven economy, the role of a Chief Technology Officer is crucial for any business looking to leverage innovative technology approaches to improve and increase its business.
Yet, not every startup is ready to make the commitment and financial commitment of hiring a C-level leadership, including a full-time CTO.
This is where outsourcing the technology development leadership to a part-time or fractional CTO can be a more sensible option for the startup: you’ll get the quality of leadership you need, with a more affordable cost and a lower level of commitment.
In this guide, we will discuss how a fractional CTO benefit your startup. Once you’ve finished reading this guide, you’d have learned about:
- What is a fractional CTO
- Responsibilities of a part-time or fractional CTO
- Signs you need a part-time CTO for your startup
- Benefits of hiring a part-time or fractional CTO
Let us start this guide with the definition of a part-time or fractional CTO.
What is a Fractional CTO?
First, so that we are on the same page, what is the CTO’s role?
A chief technology officer (CTO) is the highest executive position in a company leading the engineering or technology department. Typically a CTO is responsible for all the organization’s technological and R&D needs, sanctioning tech-related investments to help the business achieve its objectives.
In practice, the CTO’s role and responsibilities are often the vaguest among the other C-level roles. Different companies may require their CTO to fulfill different responsibilities depending on many different factors: startup location, the number of in-house vs. remote/outsourced employees, workflow style, and so on.
A fractional CTO, or a part-time CTO, on the other hand, is essentially an individual that performs the role and responsibilities of a CTO at a fraction of the average hours per week (hence, “part-time), costs, and contract period when compared to a traditional full-time CTO.
Typically a fractional CTO works remotely over the internet (although they may work on-premises), so they are also often called “virtual” CTO.
In practice, a fractional CTO can come in several different forms, for example:
- An individual professional (an actual CTO) that works part-time remotely or on-premises to fulfill CTO responsibilities for your company
- A company or independent consultant that provides tech and/or business consultation service, covering the role and responsibilities of a CTO on a per-consultation basis.
- An agency or consultant company that covers the responsibilities of a CTO on a contract-to-hire basis.
Yet, despite the different models, the underlying principle remains the same: your company is outsourcing the role, tasks, and responsibilities of a CTO to a third party that will work part-time for a fraction of financial, resources, and time commitments.
What Does a Fractional CTO Do?
Since a fractional CTO should cover the role and responsibilities of a traditional CTO, then it would help to first understand what the main duties and responsibilities of a CTO are.
Although, as mentioned, the role of a CTO is often vague and often overlaps with other roles (i.e., Chief Information Officer), typically, a CTO is responsible for leading and overseeing the development and usage of technology within the company and for external parties (customers, vendors, clients, etc.) to help improve and grow the business.
In practice, a CTO’s role in an organization may fall into one of the following roles:
- Strategic thinker: Develop strategies and business models while leveraging technology to cater to different target markets
- Strategic planner: implementing a comprehensive technological strategy for the organization while continuously developing new business strategies
- Infrastructure manager: overseeing the organization’s technological infrastructure (networking, data security, etc.), including performing regular maintenance to systems. Also responsible for implementing the organization’s technological strategy.
- Consumer liaison: focus on leveraging technology to deliver better service and products to customers, ensuring projects are aligned with customers’ needs. Understanding the target audience and ensuring IT projects can cater to the audience’s preferences.
Thus, the role and responsibilities of a CTO (including fractional CTO) in your company can vary depending on the state of the company itself and the technology available (or planned technology investments in the future.), but here are some of the most common responsibilities of a CTO:
- Strategic Responsibilities:
- Defining both short-term and long-term IT objectives for the company based on factors like the organization’s objectives, available budget, industry trends, and so on.
- Identify opportunities and risks related to technology investment and implementation for the business.
- Monitor technology trends that could help the organization in achieving its objectives, implement new technologies that may produce competitive advantages
- Implement policies related to technology, including data security policies
- Participate in management decisions regarding corporate governance
- Build quality assurance and data protection processes
- Research and Development Responsibilities:
- Keeping the organization informed about the current technology standards and compliance regulations
- Manage R&D of IT assets, technology implementations, and associated revenue
- Research and recommend the most effective technology investments (hardware and software)
- Develop technical aspects of the organization’s strategy to ensure tech alignment with the organization’s objectives
- Developing and implementing a comprehensive strategy to oversee the use of technology in the organization
- Review and approve new designs and implementations for IT infrastructure and communication systems
- Other Responsibilities:
- Define and explain the KPIs of technological projects to stakeholders.
- Manage internal communications and collaborations within the IT team and any departments related to technology implementations. Facilitating communications between in-house IT team and outside parties (i.e., vendors, agencies, clients.)
- Help teams and departments use technology profitable in achieving their objectives.
- Monitor KPIs and budgets against technological performance
- Communicate technology strategy to vendors, partners, investors, and other relevant stakeholders
- Analyzing and using stakeholders’ feedback to perform necessary adjustments and improvements to technology implementations.
- Measuring performances of IT projects and providing comprehensive reports to explain ROI for each technology investment made out of the IT budget.
Why Should Your Startup Hire a Fractional CTO
Now that we’ve understood the concept of a fractional CTO and its roles/responsibilities, we can see that the main benefit of hiring a fractional CTO is cost-effectiveness.
Typically outsourcing to a part-time or fractional CTO will require a lower financial commitment. However, while a fractional CTO might not always be lower in cost when compared to having a full-time CTO to lead the team, you can get more value out of your investment.
The benefits of a fractional CTO can extend beyond the lower financial commitment, including but not limited to:
1. Providing directions and valuable leadership
A very common mistake made by most startups is to have a “go with the flow” mentality when it comes to leveraging technology.
However, it’s crucial to remember that efforts without directions are literally, nothing.
As your startup grows bigger (which should be your goal), the values of leadership and clear directions will be more and more precious.
A fractional CTO can provide the strategic leadership and directions your company needs in leveraging technology to achieve its objectives.
2. Long-term planning and implementation
Outsourcing to a fractional CTO can be a cost-effective solution for startups to gain access to valuable leadership that can oversee day-to-day IT/tech operations while also planning for the long-term.
A fractional CTO, whether in the form of an experienced professional, a consultant, or an agency, can strategically assess your company’s strengths, challenges, and opportunities when it comes to technology investment and implementation.
3. More experience for better strategy
As a C-level role, experience is very valuable for any CTO, but finding a CTO that is rich in experience across different industries and niches can be extremely challenging, if not downright impossible.
By outsourcing to a fractional CTO, you can gain access to a professional or agency with this wider range of experience, allowing the part-time CTO to be able to develop more innovative tactics and strategies they’ve learned from experience and implement them in your business.
4. Versatility in commitment
When you are outsourcing the CTO responsibilities to a part-time or fractional CTO, you can opt to sign shorter commitments (i.e., 30 to 90-days long contracts, while if you are hiring a full-time CTO, most likely, you’ll need to commit to a longer tenure (2-3 years and above.)
Meaning, by hiring a fractional CTO rather than a full-time CTO, your company will have more versatility in mitigating its financial risks as you see fit.
This benefit is also valuable in situations when you are actually looking for a traditional CTO but haven’t found the right people for the job. In this case, a fractional CTO can help to fill the gap until you can find the right person.
5. Transparency and accountability
Proper leadership is crucial in providing better transparency for each role in the team while also ensuring accountability.
This is where a fractional CTO can provide a clearer understanding of what it takes for the IT team to perform impactful work, which can eventually lead to better work morale, higher employee satisfaction, and better confidence in accomplishing their tasks.
If hiring a full-time CTO isn’t possible or desirable at the moment, outsourcing to a part-time or fractional CTO can be a more sensible choice that can help improve transparency and accountability in your team by developing a comprehensive but attainable plan where everyone knows exactly what their role is and what others in the team are currently responsible for working on.
6. Insights and knowledge
Outsourcing to a fractional CTO would also mean gaining access to the agency/consultant or individual’s knowledge and insights.
In practice, this can allow IT and tech projects to be powered with valuable strategic insights, allowing these projects to move more smoothly toward their objectives. As a result, the organization can be more effective and efficient in winning the competition.
7. Improved Efficiency
Not only in terms of lower financial commitments and cost-effectiveness but a fractional CTO can solely focus on planning and implementing their strategy rather than dealing with internal conflicts and politics.
By outsourcing to a fractional CTO, organizations can now free the part-time CTO from the unnecessary administrative responsibilities (which are common with full-time CTOs), so they can focus on achieving the IT objectives and other more important responsibilities.
Signs Your Startup Needs a Fractional CTO
You’ve learned the definition, concept, and potential benefits of fractional CTO for your startup.
Yet, you are still unsure and can’t make up your mind whether to hire a fractional CTO or not.
With that being said, here are some common and important signs that your business needs a fractional CTO at the moment:
1. You are not ready financially to commit to a full-time CTO
This one is pretty self-explanatory.
Probably your startup is on a limited budget at the moment, or you are simply not yet ready to commit to hiring a full-time CTO. After all, hiring a full-time CTO can cost you more than $200,000 a year after accounting benefits, and not all startups are ready to make this level of commitment.
Sometimes, the budget may not be the main issue, but there are simply not enough leadership responsibilities available to justify a full-time hiring commitment, for example, if the number of IT projects is still fairly small, and you technically need a CTO only for strategic planning.
In these scenarios, hiring a fractional CTO can be a more sensible and cost-effective option for your startup.
2. Your business is in absolute need of tech leadership
You’ve probably gotten away with your IT and data security team for some time now. However, your organization may lack clear strategic directions on how to leverage technology to achieve your business objectives.
Proper executive leadership can be the missing link your team needs to help your organization achieve growth, and a part-time or fractional CTO can help startups of any size to come up with innovative and high-impact strategies and projects to help your achieve growth quickly and effectively,
3. You need an independent party to review and improve your current strategy
Are your current IT projects and campaigns not getting the desired results?
In this case, a fractional CTO can help review and analyze your strategy while leveraging their experience and insights, so you can improve your future projects and campaigns to achieve better results.
4. You lack insights when making tech-related decisions
If you don’t possess enough insights to inform your company’s executive technical decisions, it can lead to ineffective efforts and mistakes, which ultimately translates into wasted time and resources.
For example, you don’t have enough experience with specific technology investments, so you can’t make the most of the technology, and it doesn’t produce the desired results.
A fractional CTO can provide you these valuable insights, as well as perform additional research and analysis to help you make informed decisions.
Outsourcing your executive technology leadership to a fractional CTO can provide a cost-effective way for your startup to get high-quality executive leadership and the values of a full-time CTO while allowing a short-term and more versatile level of commitment.
Outsourcing to a fractional CTO can be a cost-effective solution for your business if you are not yet ready to meet the budget of a full-time CTO or if you feel that there aren’t enough executive jobs at the moment to justify the cost, among other reasons.
Also worth considering, a part-time fractional CTO can also fill the gap and provide you with the services you need while you search for a full-time candidate.